At the Close: No New High Today as Stocks Dip

By Ben Levisohn

The S&P 500 fell 0.5% to 1,746.38, while the Dow Jones Industrial Average dipped 0.4% to 15,413.33.

There was little news driving stocks lower. Some reports had China letting money-market rates rise, potentially slowing its growth. Credit Suisse’s Andrew Garthwaite and team worry that China’s economic growth has peaked and its impact on cyclical stocks:

…the main downside risk to an otherwise optimistic global macro and market
scenario remains Chinese GDP growth. We would like to stress that while we stick with our long-standing underweight of mining (and its related plays), we believe investors should continue to overweight cyclicals and beta, although the call now is much tougher than it was when we raised cyclicals to overweight in May and banks to overweight in July.

The bulls however, are still delighting in the Fed’s delayed tapering. S&P Capital IQ’s Alec Young credits the government shutdown for boosting risk appetite. He writes:

Ironically, had the shutdown been very short, it would have had a less positive impact on stocks in that it wouldn’t have pushed out Fed tapering expectations. By lasting a little over two weeks, the shutdown ended soon enough to avert investors worst debt ceiling worries while still persisting long enough to materially interrupt the flow of government economic data and modestly depress Q4 growth, thereby shifting consensus Fed tapering expectations from December to March. As such, the political impasse managed to reinforce the “not too hot, not too cold” goldilocks economic dynamic that’s been a key pillar of the current bull market. Investors are left with an economy that continues to expand steadily enough to help companies meet modest EPS expectations, while still remaining too feeble to engender any near-term tapering worries. In short, goldilocks is alive and well.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.